Power: The Opportunity of Plenty in Odisha

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By N Dutt

Since 2006 the Government of Odisha has executed 29 Memorandum of Understandings (“MoU”) with private players for developing thermal power plants in the state. The objective of executing the MoUs are two folded namely a) meeting electricity requirement of the state and b) spurring economic growth through investments. These 29 MoUs promise 37000 MW of capacity addition, out of which around 6000MW would be the share of Odisha.  As of today about 4 MoU based projects are going to get commissioned by FY 2014-15 and will bring 4000 MW of installed capacity in the state.

Tata Power

Looking at the electricity statistics provided in Central Electricity Authorities (“CEA”) Load Generation Balance Report from FY 2007-08 to 2012-13, Odisha has a mean energy deficit of 1.54% and mean peak power deficit of 1.43%. In this period the average peak deficit was around 83 MW with the maximum peak deficit of 192 MW observed in FY 2012-13. The peak power requirement per annum increased from 3035 MW in FY 2007-08 to 3564 MW in FY 2012-13 with a Compound Annual Growth Rate (“CAGR”) of 2.71% p.a. The unrestricted energy demand in this period was maximum 2096 MU in FY 2012-13 and increased from 1765 MU in FY 2007-08 at a CAGR of 2.96% p.a. The all India increase in peak power demand and average energy demand during this period was 3.71 % p.a and 5.13 % p.a respectively.

From the above statistics it can be clearly seen that there is neither any substantial peak power deficit nor significant energy demand deficit in Odisha. Even the rate of growth of peak power demand or unrestricted energy demand is lower than the rest of India. Further, observing the monthly grid frequency since July 2012, an increasing trend of average frequency remaining above 50 Hz is being observed in the Odisha grid. With better frequency there is a comfortable real time position of the state grid and any additional power would only set to disturb it. Therefore if there is no substantial electricity demand in the state where will the 1000 MW (25% of 4000 MW) state share of MoU based power go?

There are two options the state has in respect to this power a) It is used in meeting the entire demand in the state on a 24×7 basis or b) it is exported outside the state. Catering to entire energy requirement in the state, as it stands today, may not consume more than 1% of the state share of energy. This additional catered demand would be primarily for agriculture and lower income consumers who get highly subsidized power and would further bleed the distribution companies. The second option appears more realistic as GRIDCO Ltd is amongst the highest traders of power in eastern region grid and revenues from trading go in meeting the accumulated losses of the distribution licensees on its balance sheet.

In the coming few years, as the state will be having a significant quantum of power, the opportunity of exploiting this potential for spurring economic growth is huge. One may venture into thinking of consuming a sizable portion of this within the state and exporting the rest. By doing so twin objectives of supplying continuous power to all consumers and meeting financial losses of distribution licensees can be simultaneously fulfilled.

To achieve this, first, Industrial demand should be increased by encouraging investments in the state by providing consistency and clarity in policy, reducing red tape and reigning in over bearing powers of beurocrats. Secondly, distribution licensees should be made financially viable so that they are in a position to pay GRIDCO Ltd the cost of power it is purchasing from IPPs on their behalf. This can be done by

a) charging (and recovering) money from agriculture/lower income group consumers for electricity consumption,

b) increasing electricity rates regularly across consumer categories and

c) reducing technical and commercial losses to make the wires network efficient.  As power is a critical infrastructure in economic growth, it is imperative that this opportunity of plenty is decisively grabbed by the state for its overall development. It needs to be seen what steps the Orissa government takes to capitalize on this.

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